Backdoor Roth IRA Ultimate Guide and Tutorial

[Editor’s Note 1/23/2020: This popular post has been updated with 2019/2020 contribution limits where possible. However, take notice that the video and Form 8606 were created in 2017 and contain contribution limits for that year. The process of filling out the form is still the same regardless of how future contribution rates change so I’ve left them as is. If you’ve hesitated to make a Backdoor Roth IRA contribution on your own in the past, this guide should give you the confidence to go ahead and make the conversion yourself.]

I’m still getting frequent questions on how to do a Backdoor Roth IRA. So I thought I’d put together a basic, step by step, tutorial people can refer to when they do this. Before I get into it, realize that if you are a low earner you can just contribute DIRECTLY to a Roth IRA and skip this Backdoor Roth IRA process. Low earner is defined as a Modified Adjusted Gross Income under a phaseout range of $124,000-139,000 ($196,000-206,000 married). Some docs like residents or peds/family practice/preventive medicine docs married to a non-earner can usually just contribute directly.

Note also that a Backdoor Roth IRA is primarily a two-step process, an IRA contribution and a Roth conversion. If you understand the rules of both of these steps, putting them together is no problem.

Most physicians should be using a personal and spousal Roth IRA, and will usually need to fund one indirectly (i.e. through the back door). Not only does this provide an additional $6,000 each ($7,000 each if you and your spouse are over 50) of tax-protected and (in most states) asset protected space, but it allows for more tax diversification in retirement. That allows you to determine your own tax rate as a retiree by deciding how much to take from tax-deferred accounts and how much from Roth accounts.

5 Steps to Making the Backdoor Roth IRA Contribution

Step 1 Contribute to Your Traditional IRA

Make a $6000 ($7000 if over 50) non-deductible traditional IRA contribution for yourself, and one for your spouse. You can use the same traditional IRA accounts every year, they just spend most of the time with $0 in it. Most fund companies, including Vanguard, don’t close the account just because there is nothing in it. I do this every January 2nd. I just place it into the Prime Money Market Fund to keep the math simple. Since it yields something like 0.04% and doesn’t go down in value, the sum when you convert will be exactly the same as when you contribute. No gains, no losses.

2019/2020 Contribution Limits

Step 2 Convert the Traditional IRA to a Roth IRA

Convert the non-deductible traditional IRA to a Roth IRA by transferring the money from your traditional IRA into your Roth IRA at the same fund company. If you don’t already have a Roth IRA there, you’ll need to open one. This can be done in a minute or two online at Vanguard and is essentially the same process as opening the traditional IRA. I do this the very next day after I make the contribution. It is very straightforward. When you transfer the money, the website will throw up a scary banner saying something like “THIS IS A TAXABLE EVENT.” That’s true. It is taxable. It is just that the tax bill is zero for it since you’ve already paid taxes on the $6000 and couldn’t claim it as a deduction because you make too much money. You can now invest the money as per your investing plan.

Step 3 Beware of the Pro-Rata Rule

Get rid of any SEP-IRA, SIMPLE IRA, traditional IRA, or rollover IRA money.The total sum of these accounts on December 31st of the year in which you do Step 3 must be zero to avoid a “pro-rata” calculation (see line 6 on Form 8606) that can eliminate most of the benefit of a Backdoor Roth IRA.

You can get rid of these accounts in 3 ways:

Withdraw the money (not recommended, as the money would be subject to tax and/or penalties, not to mention DECREASING your tax-advantaged/asset-protected investment space.)

Convert the entire sum to a Roth IRA. Only recommended if it is a relatively small amount and you can afford to pay the taxes out of current earnings or taxable investments with relatively high basis.)

Roll the money over into a 401K, 403B, or Individual 401K. 401Ks don’t count in the aforementioned pro-rata calculation. Some physicians have even opened an Individual 401K at Fidelity or eTrade (the Vanguard Individual 401K doesn’t accept IRA rollovers) in order to facilitate a Backdoor Roth IRA.

Step 4 Fill Out IRS Form 8606 Correctly

The second part of The Backdoor Roth IRA is done 15 months later when you (or your accountant) fill out your IRS Form 8606 on your taxes. Don’t forget to do it or there is a $50 penalty. Remember that you need one form for each spouse. You need to double check this to make sure it is done right, even if you hire a pro. Advisors have told me that they have had to help clients fix dozens of these that tax preparers had done improperly. If you don’t do it right, you’ll pay taxes twice on your Backdoor Roth IRA contribution.

[Update 2020: To help you get step 4 right, back in 2017 I put together this Form 8606 Tutorial video AND a correctly filled out 8606 form. Both show in detail how Form 8606 should be completed in a typical year. Yours will look different if you did your conversion in a different year from your contribution, or if you had an additional Roth conversion this year. And remember, contribution limits at the time were $5,500 for an individual but are $6,000 in 2019/2020.]

Page 1 (below) shows a “distribution” from your non-deductible IRA. Since the money was already taxed, the taxable amount on your distribution is zero. Line 1 is your non-deductible contribution. On Line 2, your basis is zero because you had no money in a traditional IRA on December 31 of last year (if you’ve been carrying a non-deductible IRA for years this may not be zero.) Line 6 is zero in a typical year. Note that Turbotax may fill this out a little differently (may leave lines 6-12 blank) but you end up with the same thing. Line 13 is the same as line 3, so tax due is zero.

On page 2 (below), you are showing the Roth conversion. I’m not really sure why you have to do this twice (since you’re just transferring the amounts from lines 8 and 11 and then subtracting them), but that’s what the form calls for. As you can see, a Roth conversion of a non-deductible traditional IRA contribution without any gains is a taxable event, it’s just that the tax bill is zero for it.

When double-checking your tax-preparer’s work, you want to concentrate on lines 2, 14, 15c, and 18, and make sure they’re a very small amount, like zero, and not a very large amount, like $5500.

Notice how there is no place on the form to put the date when you made the contribution or the date when you made the conversion. It isn’t on the form your IRA custodian sends to the IRS (1099-R) either.

Harry Sit’s blog, The Finance Buff, has a nice tutorial showing how to fill out form 8606 using Turbotax, which, believe it or not, is trickier than doing it by hand.

Step 5 Repeat Next Year

Contribute and Convert Each Year

You do not have to wait any period of time between the contribution and conversion. Each year, I make my Traditional IRA contribution on January 2, then convert to a Roth IRA the next day. That gets my investment money working as soon as possible and simplifies the record keeping. Vanguard won’t let you do it the same day, so I have to wait one day anyway.

The Step Transaction Doctrine

There used to be concern that the IRS would have a problem with the backdoor Roth due to an IRS rule called The Step Transaction Doctrine. This rule basically says that if the sum of a bunch of legal steps is illegal, then you can’t do it. Some wondered if this backdoor conversion from traditional IRA to Roth was a legal transaction considering this doctrine. Those concerns, valid or not, are no longer an issue. The IRS clarified in early 2018 that no waiting period is required between the contribution and conversion steps of the Backdoor Roth IRA and essentially given its blessing on the whole process. Waiting just makes things more complicated on the 8606, as discussed in Pennies and the Backdoor Roth IRA.

Late Contributions to the Backdoor Roth IRA

While it is “cleaner” to make your contribution and your conversion all in the same calendar tax year, you can make your contribution up until your tax filing date of the next year. Late Contributions to the Backdoor Roth IRA has more details about doing this but hasn’t been updated in a while, so let’s do it now. The key to filling out the 8606 correctly when you make a contribution after the calendar year is to recognize that the contribution step is reported for the tax year and the conversion step is reported for the calendar year. So imagine you did the following during the calendar year 2018:

Made a 2017 IRA contribution (reported on 2017 8606)

Did a Roth conversion of that contribution (reported on 2018 8606)

Made a 2018 IRA contribution (reported on 2018 8606)

Did a Roth conversion of that contribution (reported on 2018 8606)

Your forms would look like this:

2017 Form 8606 (only have to fill out part I)

Note that all this serves to do is report basis for the next year. No tax is due. Since no conversion step was done during calendar year 2017, you only have to fill out lines 1-3 and 14.

2018 Form 8606 (must fill out parts I and II)

Notice a couple things here. First, you’ve got to do all of Part I plus Part II for this year because you did the conversion step, unlike last year. Second, don’t get confused by the fact that this form says “2017” and line 4 asks about 2018. This is the 2017 form and you would actually be filling out the 2018 form. But since the 2018 form didn’t exist yet at the time, I had to use the 2017 form for this demonstration. So add one year to anything you see here. But let’s go through this line by line.

Part I

Line 1 – That’s the money you contributed for 2018

Line 2 – This is your basis. Since you made a contribution for 2017 but didn’t do a conversion during 2017, your basis is $5,500

Line 3 – $5,500 + $5,500 = $11,000

Line 4 – Remember this is asking about 2019, not 2018 and since you didn’t make the mistake of doing your contribution late again, this will be zero.

Line 5 – $11,000 – $0 = $11,000

Line 6 – This is the line that triggers the pro-rata issue. Even though you made a 2017 contribution, you did so AFTER December 31st, so this line would still be zero if had to fill it out for 2017, which you didn’t because you didn’t do a conversion in 2017 and got to skip lines 4-13. But this is the 2018 form and since you converted your entire traditional IRA, this will be $0.

Line 7 – This doesn’t include conversions. Since you didn’t take any money out of your traditional IRA this year except the conversion, this is $0

Line 8 – You converted a total of $11,000 this year to a Roth IRA, so $11,000.

Line 9 – $0 + $0 + $11,000 = $11,000

Line 10 – $11,000/$11,000 = 1

Line 11 – $11,000 * 1 = $11,000

Line 12 – $0 * 1 = $0

Line 13 – $11,000 + $0 = $11,000

Line 14 – $11,000 – $11,000 = $0 Note that when you do this form for 2019, line 2 will be $0. (Line 14 on 2018 form = Line 2 of 2019 form)

Your Roth IRA contributions will need to go through the “backdoor” many times as you build your portfolio.

Line 15a – $0 – $0 = $0

Line 15b – You didn’t take money out of an IRA to help you survive a disaster, so $0

2,168 comments

Hi, I have 43K in a 403b plan from a former employer. I’ve talked to a Vanguard rep. and he suggested rolling over the 43k to a roth IRA. Since this is a transfer money from a retirement account, the limit of $5,500 does not apply. My questions are as follows: When I completed the rollover, will I be paying tax on the $43k at my high tax bracket? Is it wise for me to roll over my 43k to a roth IRA? or should i transfer this to my current employer’s 401k plan?

Depends, but if you’re in your peak earnings years, a better plan might be to roll it into your current 401(k)/403(b). Either rolling it over or converting it would allow you to do Backdoor Roth IRAs going forward.

Hey I was a little confused about this reply. I also have an old 403b and was planning on doing back door roth this year forward.

When you stated that rolling it over or converting it would allow back door Roth IRAs going forward, I’m wondering if is necessary to do this or could you just leave the 403b alone and still do back door roth going forward?

Worried that i got stuck in a bind here due to bad timing on setting up a Backdoor Roth.

My 2018 Taxes were filed by my accountant at beginning of April 2019. (did not include any IRA contributions in them)

April 10th, 2019 – Made a $6,000 contribution (2019 tax year) to vanguard
April 11th, 2019 – Made a $5,500 contribution (2018 tax year) to vanguard

April 16th, 2019 – Converted the $5,500 and $6,000 to Roth IRA.

What tax forms have I already missed that need to be completed?
I believe that I follow the above description and for the 2018 Tax Year i only need to complete lines 1-3 and 14, but do I need to resubmit an amended 1040 or anything else as well? or simply mail in the 8606 (even though it won’t be attached to my original 2018 tax year submission?

Then the 2019 tax form filed next April will include the 2019 contribution of $6,000 and the calculation for both conversions.

First off, thank you for this forum, it was extremely helpful. Please excuse my ignorance for I am a first time investor on the back door roth IRA. I’ve completed that back door roth IRA on Vanguard for $6000 (2019 max). However I have a couple questions. The Vanguard representative told me that I do not need to pay tax for the $6000 that I invested for the 2019 tax year as long as I file form 8606. Is this correct? My 2nd question is regarding how to direct the investment of the $6000 in the roth IRA. For the ease of account management, I chose the target-date-fund investment program. With my age, this fund will direct 90% into stock and 10% into bond. May I get your take on this? TIA.

What does your written investment plan say you should invest the money in? I’d do that.

Is your written investment plan to put all your investments in the Vanguard target date fund? If not, I wouldn’t do that. If you don’t have a plan, you need to get one. If you aren’t capable of writing your own, consider my online Fire Your Financial Advisor course ($499) which helps you write your own. If you need more help, you can hire an advisor. Check out these links:

I am trying to invest in commercial property. It’s a $3.4 MM property. With 20% down I am looking at 6% interest rate (15 years). The touted cap rate is 8%. I am trying to figure out the profitability of this and also trying to understand what to look out for while investing in commercial properties. I’m addition I am trying to understand how to approach bank for loans. Any information regarding investment on commercial properties would be appreciated.

I don’t know what percentage of your net worth $3.4M is, but it’s such a large percentage of mine that I would never put it all in one property, especially if I had to post on an internet forum to figure out how it worked.

There is a lot of info on the site about investing in commercial properties, but you’ll have to dive deeper than the article on the Backdoor Roth IRA. I’d start by searching in the search box.

Has anyone attempted to do a backdoor roth IRA conversion using TD Ameritrade? I opened an IRA account and Roth IRA account on TD Ameritrade. Created an opening balance for the IRA account and now I am trying to transfer it to the Roth IRA account. But I am lost at this step. It is asking “Withhold 100% for taxes” and then “Which selection describes your distribution”: A) Premature (under 59 1/2 yrs old) B) Premature (with exception) C) Disability. Then down below on the same page, it also has options for “Tax Withholding Elections”.

0. Make sure you are in your traditional IRA account.
1.Go to “internal transfer”
2. Select your traditional IRA account as the account you are transferring from
3. Select your Roth IRA account as the account you are transferring to
3a. If you haven’t connected your IRA and Roth IRA, you need to choose “transfer to a different account”
3b. Then select “yes, set up a new connection”, and then back to step 3.
4. Confirm the amount, transaction date, tax withholding, then you are good to go.

Caveat: You can only do it on-line if it’s 100% cash. If you will be moving securities, you need to fill out a Roth conversion form.

Generally you cannot contribute non-cash assets to IRAs. Maybe there are exceptions, but I don’t know of any. So no, there is no way to sell appreciated assets and avoid the capital gains because you then did an IRA contribution.

WCI I just discovered your website, read your books and realized how many mistakes I’ve been making with my financial decisions. I am employed so I only have 403 b account which has been maxed out since coming out of residency (5 years ago).

This will be the first time I open a Roth account for my and my wife (I had the wrongly idea that I cannot open any IRA because high income). On that regards, any advice on the site and investment choice?. And since this will be the first year, is there a way to make 2018 contributions or is late because if June. Also if we do not own any business is there any other retirement account that we are missing out?

Thank you for what you do. I know you make profit but you help a lot of people out of this, keep up the good work.

I am in a similar situation as Omar. I have some money in a Fidelity 403B and looking to open an account for a back door Roth IRA.

Trying to balance the ease of having all my money in the same place (so it would be easier to rebalance my portfolio) vs. the potentially more investing options available at Vanguard (so I can mimic your portfolio in the monthly newsletter).

Would you still recommend doing the Vanguard account or stick with Fidelity or is it all the same?

I’m sorry if it was answered already , but there were 45 pages of comments.

Can I do a backdoor Roth with an SEP-IRA ?? (I am an independent contractor)

I know an SEP IRA allows you to donate much more throughout the year (55K), so you would do the max contribution to the SEP-IRA through the year and then do the backdoor Roth, and then move the rest of the SEP-IRA to a 401 or 403 account ??

If you invested the money, let’s say in your asset allocation while it was in a traditional IRA, are you able to still convert to Roth? What’s the benefit of using a prime money market fund? For example, as the year goes on I’ve been saving money in my traditional IRA up to 6k. Am I able to invest in asset allocation in the meantime to earn a better rate before I convert?

Yes, you can do that. The benefit of leaving it in prime is the principal is much more stable. If you put it in stocks, they might go up or down between the contribution and conversion steps, making the paperwork slightly more complicated.

Why don’t you put all $6K in at once and then convert it the next day? If you make enough that you have to fund a Backdoor Roth IRA, you presumably make enough to do it all at once, no? (Unless you’re MFS and that’s why you have to do the BD roth).

Thanks for the reply. They checked Box 2a, “Taxable amount.”
I see where you mean though, Box 2b is “Taxable amount not determined.”
Did I do something wrong in the backdoor conversion? I followed all the steps from POFire’s blog.

I called Vanguard about this. They said that any movement out of an IRA generates a 1099R with “taxable” checked. However, they said to keep this statement with the corresponding 5498 which shows where the money went (i.e. into the Roth IRA). They said that this would prove it wasn’t truly a taxable event. Does that sound reasonable?

Hi, I think most of the comments here are about “how” to do backdoor Roth IRA properly, but can you please help me understand “why” I should do this? I don’t think I clearly understood where this method saves/earns money.

I believe $6,000 contribution is after-tax amount. This flows from your bank acct to non-deductible Traditional IRA to Roth IRA. So far, I don’t see any tax savings.

If I am right up to now, the benefit should come from having some money in Roth IRA? If so, what is the core benefit of Roth IRA?

I guess what you meant was that if I have $6,000 in Roth IRA initially and grows to $10,000 in 10 years, I don’t have to pay any taxes on the $4,000 profit, and entire $10,000 can be withdrawn?
This is a great benefit against regular investment account on which I would have to pay some taxes on the profit. And I believe this is why IRS enforced strict limit on the amount that can be contributed to this.

My wife and I have been maxing our ROTHs each year and due to a promotion are no longer eligible to make ROTH contributions. We weren’t expecting the promotion so had already contributed 2K to each of our ROTHs this year. To avoid a penalty, we each recharacterized the 2K into Traditional IRA accounts. So I now have a traditional IRA with just 2K and my wife has one with 4K (her Traditional IRA was previously created when rolling over a previous employers plan). Can we do the backdoor this year- the same year we recharacterized the ROTHs into traditional IRAs, or would we have to wait until next year?? Also with just limited amounts in our traditional IRAs, would it still be worth it to rollover this money into our work 401k and 403b accts, or just dump it all in ROTH and deal with pro rata?

By the way , Thank you for your guidance this article is very much appreciated!!

Awesome! One last question – When my 2K ROTH was recharacterized into a Traditional IRA a few days ago, it stayed invested in VTSAX. Does that matter? My next plan of action is to buy 4K of Prime Money Market Fund and then door the backdoor all 6K within a few days after that

Update: I completed these actions and am preparing to file, but Turbotax is not populating lines 6-12 on Form 8606. While line 15c shows 0 (good), line 18 shows 550 with an asterix and note: “From Taxable IRA Distribution Wkst (per IRS Pub. 590-B)”. Is this amount due to the taxable gains from $ invested in my Traditional IRA and the time the backdoor was completed for the entire balance within the same calendar year?

Line 18 is higher for my wife (4,200), and I’m hoping that’s because she had a higher Traditional IRA balance due to her previous employer’s rollover.

Any help would be greatly appreciated. I think we will be in a much better spot for tax year 2020 since there will be no re-characterizations involved, and I now know to dump everything into a money market versus investments and complete the backdoor within the next few days.

I’ve seen Turbotax do that too. I think the key is the bottom of the form. As long as it gets the tax right, I wouldn’t worry about it too much. You can override those lines using “forms mode” on the downloadable version if you want.

I don’t feel like I have enough information to answer your other questions. I don’t really understand what you did and what is on the forms. Having gone over all this for other readers to try to answer similar questions, it’s about a 2 hour commitment for me to really sort out what is going on between multiple emails and pouring over your financial forms. Sorry I couldn’t be more helpful.

I currently have all my investing through Fidelity for retirement. I am now able to start investing through a Backdoor Roth and am trying to figure out the best way. In thinking of zeroing out your account, is it easier to open another account with the company you current use or have separate one that you do this with? Also the one for me and my spouse have to be through separate accounts, right?

New attending here. My wife and I contributed to a Roth IRA this year expecting our income for the year to be under $192k. After unexpected bonuses (yay), even with full 401(k), 457(b), and HSA contributions our taxable income is going to be over $200k. Any resources on how to fix this?

My assumption is that I can recharacterize my Roth contributions as tIRA, and then I just have to pay taxes on what was earned already? Such a headache.

Thanks for the information on the blog, I am hoping you can answer a few quick questions.

I currently have a Roth IRA with Fidelity with $xx,xxx. I accidentally contributed $6,000 this year
even though I’m not eligible to do so. I also have a Rollover IRA with Fidelity with $xx,xxx from a previous jobs 401k . I submitted an application to re-characterize the $6,000 from the Roth into the Rollover IRA. I then wish to perform the backdoor Roth IRA move. How can I perform that with my current situation? Is my Rollover IRA that used to be a 401k considered a traditional IRA?

If I understand the Pro-Rata rule correctly, I’d need to roll over the money from my Rollover IRA into a 401k. But how can
I rollover the entire amount and only leave the $6,000 I recently put in which I wish to converts? This seems counter intuitive to me.

Additionally, I separated from a job recently and plan on rolling that over that 401k into the existing Rollover IRA or my new Solo 401k. Would this put me over the limit of 2 rollovers that the IRA allows in a 12 month period? I’d appreciate any help you can give. Also if you think I should seek a CPA or another professional please let me know. Thanks!

If your 401(k) only accepts pre-tax dollars, then perhaps you can isolate the basis, then convert it. But if they don’t, you would have to convert the whole thing and pay the taxes on the pre-tax dollars.

There is no limit on direct transfers, just rollovers where you take possession of the money. In general, high earners should not roll over 401(k)s into IRAs due to the pro-rata rule on Backdoor Roth IRAs.

Would it be a wiser decision to cancel my re-characterization, open a new IRA and then have the 6,000 transfered into my existing Roth? This way I avoid mixing the money all together. Before that’s done of course I will transfer the Rollover IRA into a new Self Employed 401k.

What’s your advice for high earners when they leave an old job with a 401k. Leave in place instead of convert to IRA?

That makes perfect sense. I also have a TSP from military as well but I actively select my stocks so rolling over old job 401(k)’s to an IRA appeal to me after leaving a job. Please see my steps below to see if they make sense.

Thank you so much for this forum, it is very helpful. I have a question with my current accounts. Currently, my wife and I have a Roth IRA’s which are maxed out each year. We also have a rollover IRA from my wife’s old job. Do you recommend leaving this account as a rollover IRA? There is not a lot in this account currently because she was only at this job for 3 years. Thank you so much for your help!

Thank you so much for your help. I am currently in the military, so I wouldn’t consider my income as “high”. This may be a dumb question, but converting the rollover IRA into our Roth IRA would we get into trouble if we already contribute $5,500 to each account annually? I did not know if you can contribute the maximum amount annually and still convert a rollover IRA too. Thank you again for your help!

Looking for Clarification. I have a Roth IRA through Fidelity currently 16K inside, i am a new attending as of June 2019. What steps do I take with this account? Do I move it all to a Traditional IRA and then convert back to a Roth? Appreciate all responses thank you.

In Step 3 you say “The total sum of these accounts on December 31st of the year in which you do Step 3 must be zero to avoid a ‘pro-rata’ calculation”. Should this be “the year in which you do Step 2”?

On a (possibly) related note, if Steps 1 & 2 are performed in 2019, does the sum of all SEP-IRA, SIMPLE IRA, traditional IRA, and rollover IRA need to be $0 on 12/31/2018 or 12/31/2019?

I just performed the backdoor Roth conversion for my wife, and everything seemed to go smoothly. However, her Traditional IRA accrued $0.33 of interest in the 24 hours that the money was there. 2% would be a great return on a money market, but I’m worried it has screwed up the tax exempt status of this process. And it is going to be worse for my Traditional IRA, as there is a 7-day hold, which will probably result in ~$2.30 of accrued interest

Is this a problem? What should I do with the $0.33 / $2.30 sitting in our Traditional IRAs?

I contributed the full $6000 to both accounts. I understand that I can transfer up to $6000.49, with takes care of the $0.33, but about the ~$2.30? The “pennies-and-the-backdoor-roth-ira” post makes it seem like I can put more than $6000 per year into a Roth IRA. Is that an accurate interpretation?

conVERt vs. conTRIBute; I think I get it:
– I can conTRIBute up to $6000 across all of my IRAs per year ;
– I can conVERt any amount of (IRA?) money into a Roth IRA per year; however,
– the amount of any conVERsion that exceeds my conTRIBution in the same year is taxable
(I’ve ignored how basis affects these principles because, honestly, I just don’t understand basis)

I have about 15K in a traditional IRA that I am going to convert to a Roth before 12/31/19, and then eventually start the backdoor Roth conversions in January 2020. I accidentally contributed ~1000 in 2019 to the traditional IRA this year even though my income is too high to deduct this. Would it be simpler to remove this money as an excess contribution first, and then contribute $6000 to the traditional IRA to convert to a Roth starting in January for the tax year 2019? I’m just not sure how to factor in the money that I contributed this year to the traditional IRA if I plan to convert to a Roth.

I was worried about accounting for the gains on the 1000, since that’s been sitting there for 9 months. My thought was to remove the excess contribution+ gains, convert the full account to a Roth. Deposit 6000 and then immediately convert that to a Roth. Does that sounds right?

No. You’ll owe taxes on the gains either way. No sense in withdrawing anything. Just add the rest, do the conversion, and pay the taxes. The IRA provider will be able to tell you what the gains are if it isn’t clear to you.

Does the pro-rata rule also apply to a beneficiary traditional IRA? I received an IRA after a family member passed away and wasn’t sure if that would need to have a zero balance in order to avoid the Pro-rata rule. Thanks.

I went through quiet a bit of effort (fidelity made an error) to transfer my Fidelity tIRA into my company’s retirement program (TSP) last month, so I can proceed with a backdoor rIRA. I’m ready to start the backdoor rIRA and now see $3.36 cash balance from a deposit that was made on 9/30/19 from DIVIDEND RECEIVED FIDELITY GOVERNMENT CASH RESERVES. How should I proceed? Do I just transfer $6000 into the tIRA and convert whatever the balance is to rIRA? If I do this, how complicated do taxes become?

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